Oil market has had one of the worst weeks
2023.03.10 03:01
Oil market has had one of the worst weeks
By Ray Johnson
Budrigannews.com – Oil fell for a fourth session on Friday, heading for its biggest weekly loss in five weeks due to concerns about the potential impact of steep interest rate hikes on fuel demand and slowing growth in the United States.
Brent sank 0.6 percent, or 48 cents, to $81.11 per barrel at 04:34 GMT. At $75.12 a barrel, U.S. West Texas Intermediate crude (WTI) was down 60 cents, or 0.8 percent.
The global growth outlook has been clouded by expectations of ongoing rate hikes in Europe and the world’s largest economy. As a result, both crude benchmarks have fallen by more than 5.5% so far this week, their lowest level since early February.
Jerome Powell, who is in charge of the U.S. Federal Reserve, has stated that the Fed was mistaken in its initial assumption that inflation was “transitory” and that it was astonished by the strength of the labor market. As a result, he has apprehensively hinted at further rate hikes, some of which could
Even though the number of Americans filing new claims for unemployment benefits increased by the most in five months last week, the labor market is still considered to be tight.
In a note, analysts from Haitong Futures stated, “Investors have become increasingly cautious.”
Financial markets have already experienced steep declines as a result of the possibility that the U.S. jobs report on Friday will result in faster rate hikes, and analysts anticipate that oil prices will also be under pressure.
According to Haitong analysts, “all eyes are on U.S. data due later today, the most important guide before the Fed unleashes a rate hike.”
On the supply side, it was reported that the United States privately urged some commodity traders to forget about shipping price-capped Russian oil in an effort to stabilize supply, suggesting that more Russian oil might enter the market.
Russia’s decision to cut oil output by 500,000 barrels per day in March is being closely watched by investors.
This week, reported that Russia intends to reduce daily oil exports and transit from its western ports by 10% in March from February.
Problems of the Oil market
Although concerns about rising interest rates and disappointing data from China put crude on track for steep weekly losses, oil prices fell further on Friday as markets awaited labor market data for additional clues on U.S. monetary policy.
This week, the oil markets focused a lot on the Federal Reserve because the bank’s hawkish signals hurt crude prices and raised the possibility of higher interest rates. Markets became more worried that tighter monetary conditions could lead to a recession in the United States, which could hit oil demand hard this year.
The Fed’s hawkish rhetoric has been driven by two main factors: high inflation and a strong jobs market. Now, the focus is on data for February, which is due later today.
Even though the reading is expected to have dropped significantly from January, any indications of job market resilience give the Fed more leeway to keep raising rates. Over the past ten months, nonfarm payrolls have also consistently surpassed estimates.
By 22:38 ET (03:38 GMT), futures had fallen 0.4% to $81.25 a barrel and 0.6% to $75.25 a barrel. This week, which would be their worst since late January, both contracts were expected to lose about 5%.
The was boosted by expectations of higher interest rates, which weighed on oil and other commodities priced in the currency. Additionally, a stronger dollar makes oil more expensive for buyers abroad, which reduces demand.
Oil markets were also impacted by China’s weak economic signals because the world’s largest oil importer saw a decline in oil imports between January and February.
Bets that a rebound in China will drive oil demand to record highs this year were dampened by the country’s slower-than-anticipated economic recovery following the lifting of COVID measures.
Even though the country experienced a significant uptick in business activity throughout February, this has not yet resulted in an increase in import demand for crude and other commodities.
Oil markets traded largely past signs of a possible supply tightening as a result of pessimism regarding the Fed and China.
After 10 consecutive weeks of growth, data this week showed that the United States unexpectedly fell in the past week. Additionally, major oil executives in the United States stated that the nation’s production likely had reached its zenith.
More:
Strong dollar puts pressure on Oil quotes
Russia and India undermine dollar with help of energy market
Price of Oil accelerated fall after Powell’s comments
